Amazon in advanced talks to put its coveted HQ2 in Virginia, just south of D.C., Washington Post reports

By Jonathan O'Connell and Robert Mccartney

Washington Post|

Nov 03, 2018 | 9:10 AM

Amazon CEO Jeff Bezos walks onstage in Seattle.

(Ted S. Warren/AP)

Amazon has held advanced discussions about the possibility of opening its highly sought-after second headquarters in the Crystal City area of Arlington, Virginia, including how quickly it would move employees there, which buildings it would occupy and how an announcement about the move would be made to the public, according to people close to the process.

The discussions were more detailed than those the company has had regarding other locations in northern Virginia and some other cities nationally, adding to speculation that the site in Arlington County is a front-runner to land the online retail giant's second North American headquarters and its 50,000 jobs.

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The company is so close to making its choice that Crystal City's top real estate developer, JBG Smith, has pulled some of its buildings off the leasing market and officials in the area have discussed how to make an announcement to the public this month, following the midterm elections, according to public and private-sector officials who spoke on the condition of anonymity because Amazon has asked that the selection process remain confidential. The company may be having similar discussions with other finalists.

Two people close to the process said that if Crystal City was selected, Amazon was likely to move an initial group of several hundred employees into 1851 S. Bell Street or 1770 Crystal Drive, two dated office buildings that have been targeted for redevelopment but could be readied for occupancy by their owner, JBG Smith, in nine months or less. The bid also includes sites in Potomac Yard, in Alexandria.

"There's a lot of activity," one individual close to the process said. The person added that people "seem really positive, and they seem pretty confident. . . . What we don't know, maybe there are two or three other sites, and they're doing the same thing. That's what's scary to people around here."

At a conference in New York on Thursday, Amazon founder Jeff Bezos told the crowd: "Ultimately the decision will be made with intuition after gathering and studying a lot of data - for a decision like that, as far as I know, the best way to make it is you collect as much data as you can, you immerse yourself in that data but then you make the decision with your heart." (Bezos also owns The Washington Post)

Spokesmen for Amazon and JBG Smith declined to comment, as did Arlington County Board ChairKatie Cristol.

Virginia Gov. Ralph Northam, asked on WTOP Radio on Wednesday about speculation that Crystal City was the front-runner said, "A lot of us are anxiously awaiting a decision, an announcement from Amazon. . . . A lot of [Virginia government] resources are being expended right now, and I think for good reason."

A spokesman for Northam declined to comment further on Friday.

Crystal City Metro station in Arlington, Virginia.

(Astrid Riecken/For The Washington Post)

After launching a reality show-like sweepstakes for a second home in late 2017, Amazon has effectively shut down disclosures about the search in the past nine months. Twenty finalist cities - many of which have spent considerable time and money pursuing the company - have little information about where they stand, according to officials in four other finalist jurisdictions.

But stock market investors, online betting sites and corporate relocation experts have all declared northern Virginia the favorite to land the so-called HQ2.

Washington-area leaders believe the project is theirs to lose, and that Virginia, Maryland and the District of Columbia would all benefit economically. Crystal City, with easy transit access, proximity to Reagan National Airport, and ready-to-occupy office buildings, has long been considered a strong contender. The District and Montgomery County, Maryland, also are among the 20 finalists.

Betting sites give northern Virginia the most likely odds of landing the project, and stock analysts have sweetened their view of JBG Smith - owner of most of Crystal City - as Amazon's announcement has approached. Analysts at Stifel Nicolaus recently upgraded the company from "Sell" to "Hold" and say just the possibility that Amazon chooses Crystal City has added four or five dollars to the company's stock price.

In the Washington area, the anticipation is growing as hints filter out that Amazon is in the final stages of making a decision. The company tentatively considered making an announcement by the end of October, but has now put it off until November, according to individuals close to the process.

"They have said publicly they want HQ2 operating in 2019," one person said. "Starting to work on that level of detail with the finalists is something they absolutely are doing. . . . I think it's a very small number of finalists. . . . [The announcement] requires some level of coordination and advance notice."

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Sharon Bulova, chair of the board of supervisors in Fairfax County, Virginia, where one of the sites is located, has felt the vibe.

"What I pick up from residents is enthusiasm," she said. "They're excited about the jobs that Amazon would bring."

It's also anxiety. Months of waiting have not quelled concerns about the potential pressure Amazon could place on the region's already steep housing prices, congested roads and yawning divide between its wealthy and low-income residents.

When Bezos spoke at an Economic Club of Washington event in September, more than a dozen protesters occupied the sidewalk outside and civic groups - sometimes joined by union activists - have raised concerns about what the addition of such a fast-growing company would mean for the region's schools, roads and housing prices.

Even without Amazon, the Metropolitan Washington Council of Governments has estimated that the region needs to add 235,000 housing units by 2025 to keep pace with expected job growth.

Amazon's arrival could push the goal to around 267,000 by 2026, according to a recent analysis by the Urban Institute. Right now the region is only on pace to add about 170,000 new units by then, and the shortage threatens to exacerbate inequality."

"Whether Amazon comes or not we have a challenge there," said Peter Tatian, of the Urban Institute. "The economic growth that has been going on has been benefiting some people and causing problems for others."

Amazon says it plans to make $5 billion in capital investments alone in the city it chooses, and that its headquarters injected an additional $38 billion into the local economy in Seattle, generating an additional $1.40 for every dollar the company spent. But its growth has led to fissures between the company and Seattle.

Homelessness in the city has escalated and Amazon vowed to cancel some of its expansion plans if the city passed a new tax on big businesses to raise money to address the problem.

Bezos and the company have made several recent announcements that could soften Amazon's public image as it moves to open H2Q.

Now the world's wealthiest person, Bezos announced in September that he would donate $2 billion of his own money to support groups battling homelessness in the United States and create a network of preschools in underserved communities.

"I don't think it's a coincidence that one of those issue was homelessness," said Joe Parilla, a Brookings Institution fellow. "I think you can draw a pretty clear link between the debate that is unfolding in a lot of these tech hubs and how this gives a little bit of cover to Amazon as it is investing in these hot markets."

In October - after bearing months of criticism from Sen. Bernie Sanders, I-Vt., over its treatment of workers - Amazon announced it would raise its minimum wage for all employees to $15 per hour.

But the company's request for secrecy has kept a potentially thorny discussion, about how much states and cities should be willing to offer the company for its jobs, in the background.

A man on a scooter along the 1900 block of Crystal Drive in Arlington, Virginia, on Oct. 19, 2018.

(Astrid Riecken/For The Washington Post)

Few of the public subsidies being offered to Amazon from states, cities and counties for the project have been made public, which some analysts say could result in blowback from taxpayers if they are announced as fait accompli. Maryland has offered an incentive package worth an estimated $8.5 billion while the Newark, New Jersey, subsidies are estimated at $7 billion. On Wednesday, a judge in Allegheny County, Pennsylvania, ordered the release of Pittsburgh's proposal after a legal fight with a local television station. The decision is expected to be appealed.

"I would question why cities weren't more forthcoming [with their proposals], and I suspect it's because there would have been some push back to what the cities were offering," said Heidi Learner, chief economist for the advisory firm Savills Studley. "From the public's perspective the question is what is the city hiding or why shouldn't they share how [those proposals] would actually lead to more tax revenue down the line?"

After Amazon initially pressed for more information, some leaders were expecting to hear the list of finalists narrowed down publicly, to give economic development teams from the eliminated cities a chance to move on.

"I think the process got away from them a little bit. They probably were planning for some kind of down-selection and changed their position on that," said Jason Miller, chief executive of the Greater Washington Partnership, a business group.

In addition to tax breaks, some cities have offered to build or expand roads, transit, data networks or airports if Amazon arrives. Parilla, of Brookings, said it's preferable to "maximize the broader benefit of these investments as much as possible."

He also doesn't think it makes sense for Amazon, a $816-billion company, to press a city or state for an enormous subsidy package that could cut into money for other services.

"My sense is that Amazon doesn't want to repeat some of the antagonism in Seattle," Parilla said. "It's not great for the brand to be viewed as oblivious to the existing economic and racial inequities in the city where it's going to invest."

The ultimate decision is likely to rest with Bezos. He has a history of showing independence in such matters, such as when he needed a headquarters for The Washington Post shortly after he purchased it.